Starting a Business | Ownership Options
Starting a Business | Ownership Options
Starting a business requires talent, determination, hard work, and persistence. It also requires a lot of market research and business planning. Before starting your business, you should appraise your strengths and weaknesses and assess your personal goals to determine whether business ownership is for you – (Allen, 2001)
Different kinds of Questions to ask before starting a business
If you’re interested in starting a business, you need to make decisions even before you bring your talent, determination, hard work, and persistence to bear on your project. Here are the basic questions you’ll need to address:
What, exactly, is my business idea? Is it feasible?
What industry do I want to enter?
What will be my competitive advantage?
Do I want to start a new business, buy an existing one, or buy a franchise?
What form of business organization do I want?
Coming up with a great business idea is a gratifying adventure. For most, however, it’s a daunting task. The key to coming up with a business idea is identifying something that customers want or, perhaps more importantly the need of your customers. Your business will probably survive only if its purpose is to satisfy its customers, when coming up with a business idea, don’t ask, “What do we want to sell?” but rather, “What does the customer want to buy?
To come up with an innovative and a profitable business idea, you need to be creative and have a commitment with it. The idea generation itself can come from various sources.
Starting a company is undoubtedly a serious task and money (capital) is always a big factor. Today most small businesses are sole proprietorships, Partnerships and corporates. But when starting a business, the most common methods of having is start new business from scratch or buying an existing one, or obtaining a franchise business.
Starting from Scratch
The most common—and the riskiest—option is starting from scratch. This approach lets you start with a clean slate and allows you to build the business type the way you want. You select the goods or services that you’re going to offer, secure your location, and hire your employees, and then it’s up to you to develop your customer base and build your reputation.
Buying an Existing Proven Business
In most cases, buying an existing business is less risky than starting from scratch. Some things will be easier for you, you take over an operation that’s already have a proven product, customers, active suppliers, a known location, and trained employees. You’ll also find it much easier to predict the business’s future success.
Consider, buying a business is often costlier than starting from scratch. However, it’s easier to get financing to buy an existing business than to start a new one. Bankers and investors generally feel more comfortable dealing with a business that already has a proven record. In addition, buying a business may give you valuable legal rights, such as patents or copyrights, which can prove very profitable.
Getting a Franchise
A franchise business is a business in which the owners, or “franchisors”, sell the rights to their business logo, name, and model to third party retail outlets, owned by independent, third party operators, called “franchisees”. Franchises are an extremely common way of doing business.
the franchisee gets help in picking a location, starting and operating the business, and benefits from advertising done by the franchiser. Essentially, the franchisee buys into a ready-to-go business model that has proven successful elsewhere, also getting other ongoing support from the franchiser, which has a vested interest in her success.
Why Business Fail
Businesses fail for any number of reasons, but many experts agree that the vast majority of failures result from some combination of the following problems:
Bad business idea
Like any idea, a business idea can be flawed, either in the conception or in the execution. If you tried selling snow blowers in Hawaii, you could count on little competition, but you’d still be doomed to failure.
Too many new businesses are underfunded. The owner borrows enough money to set up the business but doesn’t have enough extra cash to operate during the start-up phase, when very little money is coming in but a lot is going out.
Managerial inexperience or incompetence
Many new business owners have no experience in running a business; many have limited management skills. Maybe an owner knows how to make or market a product but doesn’t know how to manage people. Maybe an owner can’t attract and keep talented employees. Maybe an owner has poor leadership skills and isn’t willing to plan ahead.
Lack of customer focus
A major advantage of a small business is the ability to provide special attention to customers. But some small businesses fail to seize this advantage. Perhaps the owner doesn’t anticipate customers’ needs or keep up with changing markets or the customer-focused practices of competitors.
Inability to handle growth
You’d think that a sales increase would be a good thing. Often it is, of course, but sometimes it can be a major problem. When a company grows, the owner’s role changes. He or she needs to delegate work to others and build a business structure that can handle the increase in volume. Some owners don’t make the transition and find themselves overwhelmed. Things don’t get done, customers become unhappy, and expansion actually damages the company.